In the ongoing case of Lipson v. Cassels Brock & Blackwell there has been a cost award in the certification motion. The Ontario Court of Appeal had earlier heard an appeal of Mr. Justice Perell’s decision in the certification motion and Ontario Court of Appeal sided with Mr. Lipson and which is dealt with on this blog and elsewhere. The Ontario Court of Appeal ordered “Costs of the certification motion remitted to the motion judge to be dealt with in light of this Court’s reasons.” and now Mr. Justice Perell, in his decisions, determines the cost as “I think the appropriate exercise of discretion is award Mr. Lipson the $298,582.71 that he seeks but to make $150,000.00 payable to him by Cassels Brock in the cause and the balance of $148,582.71 payable forthwith. I would not backdate the costs award. I make no order as to costs with respect to the costs submissions.” This award of costs is in addition to an earlier award of costs from the Ontario Court of Appeal which provided costs for the appeal “on a partial indemnity basis in the amount of $50,000 for fees, $10,000 for disbursements, and in addition the amount of the applicable taxes.”
Here is the text of the decision on costs:
Lipson v Cassels Brock & Blackwell
Citation: 2013 ONSC 6450
JEFFREY LIPSON, Plaintiff,
CASSELS BROCK & BLACKWELL, Defendant,
MINTZ & PARTNERS LLP, DELOITEE & TOUCHE LLP, GLENN F. PLOUGHMAN,
SHELLEY SHIFMAN, PRENICK LANGER LLP, TMK FINANCIAL GROUP LTD. GARDINER ROBERS LLP,
THE ESTATE OF RONALD J. FARANO, deceased, JOHN DOE 1-100, JOHN DOE INC. 1-100, JOHN DOE PARTNERSHIP 1-100 and
JOHN DOE LLP 1-100, Third Parties.
Ontario Superior Court of Justice, Perell, J., October 16, 2013. (Docket: 09-CV-376511CP)
David F. O’Connor and J. Adam Dewar for the Plaintiff
Peter H. Griffin, Shara N. Roy, and Ian McLeod for the Defendant.
Sean Dewart for the Third Parties Gardiner Roberts LLP and the Estate of Ronald J. Farano.
REASONS FOR DECISION - COSTS
 This is a costs decision in an action that has been certified as a class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6. The background is as follows.
 Between 2000 to 2003, Jeffrey Lipson and about 900 other Canadian taxpayers participated in a Timeshare Program in which they donated both cash and also resort timeshares to Canadian athletic associations. Mr. Lipson and the donors anticipated receiving tax credits for their charitable donations. In the marketing of the Timeshare Program, a tax opinion prepared by the law firm Cassels Brock & Blackwell LLP, was included in the promotional material. The Cassels Brock opinion was that it was unlikely that the Canada Customs and Revenue Agency could successfully deny the tax credits. Mr. Lipson says that he and the other participants would not have participated in the program but for the opinion of a reputable law firm that the charitable tax credits under the Income Tax Act would be available. In 2004, Canada Revenue disallowed the anticipated tax credits in their entirety.
 In 2004 and 2005, Mr. Lipson and other participants sought advice from a law firm that specializes in tax litigation, and in 2006, some of the participants commenced litigation against Canada Revenue as test cases to determine the availability of the tax credits for the donations. In 2008, the test case litigation settled, and Canada Revenue allowed the participants to receive a tax credit for the cash portion of the donation. Mr. Lipson and the other participants in the Timeshare Program, however, were denied the greater part of their anticipated tax credit based on the value of the donated timeshares.
 In 2009, to recover his losses, Mr. Lipson commenced a proposed class action against Cassels Brock for damages for negligence and negligent misrepresentation. Cassels Brock brought third party claims against Mintz & Partners LLP, Deloitte & Touche LLP, Glenn F. Ploughman, Shelley Shifman, Prenick Langer LLP, TMK Financial Group Ltd., Gardiner Roberts LLP, the Estate of Ronald J. Farano, deceased, John Doe 1-100, John Doe Inc. 1-100, John Doe Partnership 1-100, John Doe LLP 1-100. These third parties were involved in the promotion and marketing of the Timeshare Program.
 Cassels Brock and the Third Parties Gardiner Roberts LLP and the Estate of Ronald J. Farano opposed the certification of Mr. Lipson’s action as a class proceeding and, among other things, they submitted that the claims of all the Class Members, including most particularly Mr. Lipson, were statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. At the certification hearing, Cassels Brock conceded three of the five criterion for certification and the parties crossed swords on the issues of common issues, preferable procedure, and the limitation period defence.
 After the two-day hearing, it was my opinion that Mr. Lipson’s proposed class action was statute-barred and, therefore, the action should be dismissed. However, it was also my opinion that but for the fatal statute bar, Mr. Lipson’s action would have satisfied the criterion for certification. I would have certified five common issues and would have refused to certify two common issues. See Lipson v. Cassels Brock & Blackwell LLP, 2011 ONSC 6724.
 There was an appeal and a cross-appeal, which was dismissed. After a two-day hearing, my judgment was reversed by the Court of Appeal. See Lipson v. Cassels Brock & Blackwell LLP, 2013 ONCA 165. The Court of Appeal substituted an order certifying the action as a class proceeding and added the common issue of causation, which originally I would not have certified. The Court of Appeal did not preclude the Defendants and the Third Parties from raising a limitation period defence as the action proceeded.
 The Court of Appeal made the following order as to costs: (1) no costs of the appeal against the third party [Gardner Roberts LLP]; (2) costs of the certification motion remitted to the motion judge to be dealt with in light of this Court’s reasons; and (3) costs of the appeal payable by the respondent [Cassels Brock] to the appellant [Mr. Lipson] on a partial indemnity basis in the amount of $50,000.00 for fees, $10,000.00 for disbursements, and in addition the amount of the applicable taxes.
 Mr. Lipson now seeks his costs of the certification motion.
 Based on the fact that he served an unaccepted Offer to Settle the certification motion, he seeks a costs award of combined partial and substantial indemnity costs of $243,307 plus taxes of $31,629.91 plus disbursements of $80,145.80 for a total of $355,082.71. The disbursements include $59,299.70 for expert fees.
 In the alternative, Mr. Lipson sees costs on a partial indemnity basis of $298,582.71. He also requests $2,500.00 for the cost of preparing the costs submissions.
 Mr. Lipson submits that the foregoing amounts should be payable by the Defendants as of November 14, 2011, the date of the release of this Court’s initial decision on certification. Mr. Lipson also asks that the costs be made payable by both Cassels Brock and by the Third Parties Gardiner Roberts, LLP and the Ferano Estate.
 Cassels Brock opposes the costs requests. It submits that in the circumstances, Mr. Lipson should receive costs of $100,000.00 for the certification motion on a partial indemnity basis plus a reasonable amount for disbursements. It submits, however, that a substantial portion of these costs and the disbursement expense of Mr. Lipson’s expert report should be payable in the cause and their disposition left to the common issues judge to decide.
 By way of contrast, Cassels Brock says that its own actual costs ($169,788.79) were half of those being claimed by Mr. Lipson and that his costs claim is unreasonable and beyond the reasonable expectations of a defendant to a certification motion. Cassels Brock makes a plethora or submissions that $355,082.71 or $298,582.71 award for a two-day motion is unfair and unreasonable.
 Cassels Brock submits that the costs claimed are excessive when compared to other awards and to its own expenditure of costs for the motion.
 It submits that an analysis of the claim shows that Class Counsel was inefficient in involving five lawyers and no students save for some outsourced legal costs. It submits that some of the costs involve services outside the certification motion and should, if anything, be in the cause. It submits that $29,165.77 for internal communications is excessive. It says that 327.6 hours for legal and factual research is excessive. It submits that 134.7 hours for preparation for the certification motion is excessive and 156.55 hours for factums is neither reasonable nor within reasonable expectations. It submits that the expert’s report did not play any significant role in the certification motion and this expense should be a disbursement in the cause. It submits that it has a $10,000.00 offset for a preliminary motion that it won at the start of the certification hearing.
 There may be some traction to Cassels Brocks arguments, but, frankly, it is impossible to determine how much traction.
 The Third Parties Gardiner Roberts LLP and the Estate of Ronald J. Farano adopt Cassels Brocks submissions as to the quantum of the costs award. They submit that no order as to costs should be made against them because they were joined as third parties well after the certification motion was underway, did not deliver any evidence for the record, and limited their participation to a short factum and argument about the limitation period defence.
 Not surprisingly, Mr. Lipson responds with the case law that holds that class actions have precarious risks and Class Counsel should be handsomely rewarded in order to make the class actions regime work.
 Thus, I was told that class actions are high stakes litigation and that given the significance of certification, parties generally expend significant effort or resources in the certification process. I was told that many decisions have recognized this reality with significant costs awards. I was told that access to justice will be compromised if plaintiffs are not fairly compensated for their costs in prosecuting a certification motion.
 I also was told, not for the first time in costs submissions, that the party claiming costs had reduced the amount of costs sought in an effort to avoid debates regarding duplication of efforts or quibbling regarding specific cost items.
 Having considered the costs submissions of the parties, in my opinion, Mr. Lipson should be awarded costs on a partial indemnity basis.
 Mr. Lipson’s Offer to Settle should be ignored. It was a hollow tactical device to have a basis to claim costs on a substantial indemnity basis. Mr. Lipson must or should have known that the offer would not or could not be accepted because Cassels Brock was advancing a serious limitation period defence. Ordering substantial indemnity costs is uncalled for and would be unfairly punitive.
 It is two years since I heard the certification motion, and I have no useful recollection that might help me decide whether the costs being claimed are reasonable or within the range of what fairly might be expected.
 Frankly, it has become impossible to know whether Class Counsel did an appropriate amount of work for an important motion or indulged itself in running up costs in expectation of financing the rest of the litigation and thereby reducing the risk of its involvement in precariously risky litigation.
 Unfortunately, given the ever-upward spiral in costs awards, which would appear to be an impediment to the viability of the class action regime, there is little incentive to do only what is necessary for certification and little to curb the tendency to use the certification motion as a road test for the merits of the litigation, notwithstanding that the focus on the certification motion is whether the certification criteria are satisfied and notwithstanding that the some-basis-in-fact evidentiary standard in this regard is very low.
 That said, in the immediate case, on the one hand, I do recall that this case was a hard fought certification motion and given the limitation period defence and the challenge to two of the five certification criteria, it called for a vigilant and concerted effort from Class Counsel. But on the other hand, it does appear to me that a $300,000.00 costs award for a certification motion for this case is excessive and there appears to be some substance to the various arguments advanced by Cassels Brock to the effect that a $300,000.00 to $350,000.00 costs award for the certification of a class action about an allegedly unreliable tax opinion is unreasonable.
 I, therefore, agree with Cassels Brock that the claim for costs as requested is unacceptable. I, however, disagree with Cassels Brock’s proposal that the counsel fee be reduced to $100,000.00 plus some disbursements with most of the award being made payable in the cause.
 I think the appropriate exercise of discretion is award Mr. Lipson the $298,582.71 that he seeks but to make $150,000.00 payable to him by Cassels Brock in the cause and the balance of $148,582.71 payable forthwith. I would not backdate the costs award. I make no order as to costs with respect to the costs submissions.
 I make this award because it provides fair compensation for the successful certification hearing and preserves to the prosecution of the litigation the work effort of Class Counsel, much of which can be carried forward into the action. It is fair because a certification motion remains just a procedural motion and the merits of the litigation remain to be determined. It provides some sustenance to Class Counsel without impeding access to justice.
 I would not order any costs against the Third Parties Gardiner Roberts and the Farano Estate, which have been brought into this action by Cassels Brock with the proviso that this no costs order is without prejudice to Cassels Brock later seeking a Sanderson or similar order in the cause of the main action or in the third party proceeding.
 I leave open Cassels Brock claim for a set-off. I do not know whether a formal order was made on the preliminary motion, and Mr. Lipson has had no opportunity to respond to this claim.
 Order accordingly.
Released: October 16, 2013
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.